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Medco Suit: AZ Paid $100M for Bogus Program; BMS Paid $4M for "Worthless" Data

AstraZeneca and Bristol-Myers Squibb paid millions in bogus fees to Medco in order to keep their drugs in a favorable reimbursement position on the PBM's formulary, according to a recently unveiled whistleblower suit.

The complaint, by a former Medco vp, alleges that AZ paid Medco $60 million for a "disease-management program" on Prilosec that contained incomplete data on only 3,000 patients. The program was re-upped for Nexium for a further $40 million, the suit claims.

BMS and its DuPont acquisition paid Medco a bogus $4 million fee for worthless data in order to ensure the aggregate reimbursement price for Coumadin stayed at the same level as generic warfarin, the suit alleges.

The suit was filed by Karl Schumann, a Medco whistleblower who won a portion of a $155 million settlement in 2006. He's chancing his arm again, according to Dow Jones:

Schumann previously handled pharmaceutical contracting for Medco of Franklin Lakes, N.J., one of the biggest companies that manage drug plans for employers and insurers. Schumann also was one of the whistleblowers behind Medco's $155 million settlement of federal fraud claims in 2006. He received a portion of that settlement along with other whistleblowers, and stands to do the same if his newly disclosed suit results in a settlement.
Schumman's complaint (download a copy here) contains these highlights:


In or about 1996, in order to secure Prilosec's status as the exclusive PPI being purchased for dispensing in Medco's mail service pharmacies and as the preferred PPI on Medco's formularies, ... the AstraZeneca Defendants were to pay Medco a total of $60 million over four years.

Medco was only able to enroll some 3,000 patients in the Prilosec disease-management program. Even for the very few patients enrolled, Medco could not capture the data required to prove the program had value. As a result, at all times material hereto, it was clear the substantial monies paid by the AstraZeneca Defendants did not justify the very limited services Medco ever provided.

AZ's agreement with Medco was renewed when Nexium was introduced, the suit claims:
The renewed agreement resulted in a sham $40 million program which, rather than promoting disease-management services, had as its goal for Medco to switch Prilosec patients to Nexium.

In or around 2003, with concerns growing over the Government's ongoing investigations into shady PBM deals with drug makers (and Medco's deals, in particular) and the AstraZeneca Defendants' guilty plea and Corporate Integrity Agreement in the Zoladex case, Medco and AZ quietly disbanded the Disease-Management Agreement.

AZ didnt stop there. It also paid Medco a $500,000 payment "one time educational grant," Schumann claims, "which required no educational studies or other supporting documentation for receipt, [and] was an outright kickback."

AZ also paid Medco a $1 million fee for a "Customer Capability Agreement" for mailings to physicians and pharmacies, and a coupon program. Schumann:

The cost of providing the services was minimal such that the $1,000,000 fee was exorbitant in relation to such cost.
In the Data Purchase Agreement, Medco agreed to provide Coumadin® data to DuPont in exchange for data fee payments ... By amendment effective January 1, 1999, the parties raised the data payment to $4 million per year. During the course of the Data Purchase Agreement, DuPont (and later BMS) paid Medco millions of dollars in data fees for what was essentially worthless data, and for which Defendants had little to no use.

DuPont was, in fact, paying Medco the equivalent of up to a 63% discount on Medco's purchases so long it made Coumadin® its "House Brand" of warfarin sodium.

Medco had needed to get to 63% below WAC to justify the purchase from DPMC so that the discount would be at least as good as the price for which it could purchase the equivalent generic drug, warfarin sodium.

The government declined to join the suit, and now Schumann is proceeding on his own.
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